It Might Be Time to Take Profits on These 2 Healthcare Stocks

The healthcare sector is in focus after Senate Republicans released an updated Obamacare replacement plan

Jul 13, 2017 at 2:42 PM
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Healthcare is in focus after the Senate Republicans released a revised bill to replace Obamacare. While many high-profile stocks in the sector are lower this afternoon, the sector has been strong recently. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, 83% of the 42 stocks under our "healthcare" umbrella are trading above their 80-day moving average, with the average 52-week gain approaching 20%. However, several healthcare stocks landed on our list of stocks to sell this time of year, including Zimmer Biomet Holdings Inc (NYSE:ZBH) and Anthem Inc (NYSE:ANTM)

Zimmer Biomet Stock Approaching Chart Resistance

ZBH stock is up 2.8% at $129.92 after Bloomberg reported Jana Partners has taken a stake in the company, and may be pushing for strategic changes. This comes just a few days after the medical equipment name announced a CEO switch.

The shares have been strong all year, rising almost 25% so far. But not only are the shares of Zimmer Biomet approaching an unfavorable seasonality trend, they're running into possible resistance in the $130-to-$133 area -- site of their 2016 highs. Plus, per data from White, ZBH has lost an average of 6.4% from July 17 to Oct. 31 over the past 10 years, ending positive just three times. 

Meanwhile, analysts are somewhat split in their opinions of Zimmer Biomet. While 12 brokerage firms recommend buying the equity, eight others rate it a "hold" or "strong sell." Moreover, ZBH is trading just below its average 12-month price target of $134.78. 

Anthem Options Look Attractive

Anthem has also outperformed on the charts, gaining 34% year-to-date to trade at $192.65. In fact, ANTM shares hit a record high of $194.94 on June 22 -- the day Senate Republicans released the first draft of their healthcare bill. However, the stock is entering a historically tough time of year, finishing the July 17-Oct. 31 period with an average loss of 4% in the past decade, and only three positive finishes. 

Most analysts are on the sidelines when it comes to Anthem stock. That is, eight of 14 brokerage firms rate it just a "hold." Either way, it's a good time to buy short-term options on ANTM, according to its Schaeffer's Volatility Index (SVI). This reading of 18% ranks in the low 11th annual percentile, hinting that lower-than-usual volatility expectations are being priced into near-term options. 

 

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